Government Raises Import Duties on Precious Metals
The government has significantly increased import duties on gold, silver, and platinum to curb non-essential imports and protect foreign exchange reserves amidst rising crude oil and fertilizer costs due to the West Asia crisis.
Details of the Duty Increase
- The Customs duty for gold and silver has been raised from 6% to 15%.
- Platinum duty increased from 6.4% to 15.4%.
- Effective import duty on gold and silver now at 15%, with an additional 3% Integrated GST (IGST).
- Overall tax incidence on imports has risen to 18.45% from 9.18%.
Government's Motivation
The move follows Prime Minister Modi's appeal for economic discipline, urging citizens to reduce gold purchases, foreign travel, and fuel consumption to support the rupee and conserve foreign exchange.
Impact on Imports and Economy
- Imports of gold and silver increased 26.7% year-on-year, reaching $102.5 billion in 2025-26.
- Precious metals account for 14% of total imports.
- The policy aims to prioritize essential imports and discourage discretionary demand through price signals.
Industry Response
The Gem & Jewellery Export Promotion Council (GJEPC) questioned the effectiveness of higher duties in reducing imports, suggesting alternative strategies:
- Promote lower-carat jewellery like 14K and 9K products.
- Expand gold exchange schemes and revive the Gold Monetisation Scheme.
- Discourage investment in gold bars and coins.
- Warned of increased smuggling and export costs due to higher domestic prices.
Concerns and Suggestions
- Micro, small, and medium-sized manufacturers face a liquidity squeeze due to increased bank guarantees for duty-free gold.
- The council urged the government to engage in dialogue for sustainable fiscal solutions.
